Do I need to issue 1099s to incorporated companies or just LLCs?

Thanks for confirming what I thought! I was pretty sure we were making extra work for ourselves. Do you think I should push back on this decision, even though it came from a senior tax person? And if we do send them unnecessarily, could it cause problems for the corporations receiving them?

I would definitely recommend having a conversation with the senior tax person. Frame it as seeking to understand their reasoning - perhaps they have concerns about misclassifying vendors that could be addressed in a more targeted way. Sending unnecessary 1099s to corporations won't directly cause legal problems for the recipients, but it can create confusion. They may wonder why they're receiving a form they shouldn't need, and it might prompt them to contact you for clarification, creating more work for everyone. Some might even worry that you've miscategorized them in your system in ways that could impact other areas of your business relationship.

How does this work with existing vendors that have been in our system for years? We have over 600 vendors and I'm not sure we even have W-9s for all of them. Would we need to collect new forms from everyone?

Sounds interesting but how accurate is it really? I've used other "automated" tax services before and ended up having to double-check everything manually anyway, which defeated the whole purpose.

For existing vendors, you can upload whatever W-9s you do have, and the system will analyze those immediately. For vendors without W-9s, the service actually helps you collect them with automated email campaigns that track which vendors still need to submit forms. It's really helpful for getting compliant with vendors you've been paying for years. As for accuracy, I was skeptical too at first. But their OCR technology is specifically trained on tax forms, so it's surprisingly accurate. It even flags when a vendor's form has contradictory information (like checking "LLC" but also "Corporation"). I still do spot checks, but haven't found errors in the processing.

Wait, how does that even work? I thought the IRS phone system was notoriously impossible to get through? Does this actually connect you with a real IRS agent or just some third-party "tax experts"?

This sounds like a scam. Why would I pay someone to call the IRS for me when I can just do it myself for free? And how do they magically get through when everyone else has to wait for hours?

It connects you with the actual IRS - it's not third-party tax advice. The service basically monitors the hold queue for you and calls your phone when an agent is about to pick up. Then it connects the call so you're talking directly with the IRS. I totally get the skepticism - I felt the same way initially. They don't actually "cut the line" or anything. They use the same hold system everyone else does, but their technology monitors the call so you don't have to sit there listening to hold music for hours. It worked exactly as advertised for me - I was able to get actual clarification from the IRS about 1099 requirements while continuing with my workday.

This is super helpful - thanks for the comprehensive list! None of our vendors fall into these categories (definitely no fish purchases lol). One question though - how do you handle LLCs that elect to be taxed as S-Corps? Do they get treated as corporations or as LLCs for 1099 purposes?

LLCs taxed as S-Corps are treated as corporations for 1099 purposes, so you don't need to send them 1099s. This is where having a proper W-9 is crucial - the entity should check the S-Corporation box on their W-9, not just the LLC box. If they only check LLC without indicating S-Corp election, you would typically treat them as a partnership and issue 1099s. I've seen many LLCs make this mistake on their W-9s, which leads to confusion. If you suspect an LLC is taxed as an S-Corp but their W-9 doesn't indicate this, it's worth reaching out to verify their tax status.

This approach might be efficient for your workflow, but it's creating unnecessary confusion in the business ecosystem. As an incorporated business owner, I get 1099s from clients who don't understand the rules, and it creates extra work reconciling documents we shouldn't be receiving. Just because you haven't had "problems" doesn't mean it's a good practice.

Welcome to the community, Carmen! You raise a great point about communicating changes to vendors. When we cleaned up our 1099 process a few years ago, we did send a brief note to the corporations that had been receiving them unnecessarily, just explaining that we were correcting our reporting procedures to comply with IRS guidelines. Most were actually relieved - several had been questioning why they were getting forms they didn't need. The key is framing it as a correction rather than a policy change. Something like "We've updated our tax reporting procedures to ensure compliance with IRS requirements. As an incorporated business, you will no longer receive 1099 forms from us unless required by specific regulations." It shows professionalism and prevents confusion during tax season. @Carmen Lopez @Cameron Black - I d suggest'having that conversation with your senior tax person sooner rather than later, Cameron. With tax season approaching, now s the'time to get clarity on the reasoning and potentially suggest a more targeted approach.

Welcome to the community, Connor! You make an excellent point about framing this as a cost-benefit analysis - that's probably the most effective way to approach the senior tax manager. I'd also suggest documenting the specific business reasons for proper 1099 reporting. Beyond just compliance, there are real operational benefits: reduced administrative burden, fewer confused vendor calls, cleaner reconciliation processes, and better vendor relationships. When you can show that following IRS guidelines actually improves efficiency rather than just being "technically correct," it becomes a much easier sell. Another angle to consider - if your company ever gets audited, having a clear, defensible process for 1099 reporting (rather than just "we send them to everyone") actually looks more professional and shows you understand the regulations. Auditors appreciate seeing thoughtful compliance procedures rather than blanket approaches that suggest uncertainty about the rules. @Cameron Black - Connor s'suggestion about calculating the actual costs is spot on. Even just estimating the hours spent on unnecessary processing might help make your case!

This is exactly the kind of practical advice I was hoping to find! Jamal, your point about coming prepared with the actual IRS regulations is brilliant - I hadn't thought about bringing Publication 1099 to the discussion, but that would definitely strengthen the case. Your compromise approach also makes a lot of sense, especially for those unclear cases where we're missing proper W-9s. It shows we're being thoughtful about compliance rather than just trying to cut corners. I'm curious though - when you've helped other companies transition from the "send to everyone" approach to proper categorization, how long did that process typically take? With our agricultural clients having so many vendors, I'm wondering if there's a realistic timeline for cleaning up all that vendor documentation while still meeting filing deadlines. @Jamal Wilson - Also, have you found that vendors are generally cooperative when you reach out for updated W-9s, or do you run into resistance? I m'anticipating some pushback from vendors who might not want to deal with more paperwork requests.

@Dylan Mitchell Great questions! In my experience, the transition timeline really depends on how organized your existing vendor files are. For companies with decent W-9 documentation already on file, you can usually get 80% sorted within 2-3 weeks. The remaining 20% missing (or unclear forms is) where it gets time-consuming. For vendor cooperation, I ve'found it s'all about how you frame the request. Instead of we "need updated paperwork, try" something like we "re'updating our tax compliance procedures to ensure accuracy - could you confirm your entity classification? Most" vendors understand this, especially if you mention it s'to ensure they receive correct tax documents. The agricultural sector can be tricky because you re'dealing with everything from family farms often (sole proprietorships to) large agribusiness corporations. I d'suggest prioritizing by payment volume - get your highest-dollar vendors sorted first, then work down the list. One time-saving tip: batch your W-9 requests by sending them all out at once with a reasonable deadline say, (3 weeks .)Follow up with phone calls only for your biggest vendors who don t'respond. For smaller vendors where you re'still unsure after that, the compromise approach I mentioned earlier works well - you can always correct it next year once you have better documentation. @Cameron Black - Given your timeline pressures, this phased approach might be perfect for your situation!

Welcome to the community, Ravi! You're absolutely right that this seems to be a widespread issue across industries. Regarding vendor management systems for entity classification - I've had some experience with this at my previous company. We implemented a system that flagged vendors based on their W-9 classifications and payment thresholds, which helped automate about 70% of our 1099 decisions. The key was setting up clear business rules in the system: corporations automatically flagged as "no 1099 needed" (with exceptions for the specific categories Isaac mentioned), LLCs and sole proprietorships flagged for 1099 processing, and anything unclear or missing documentation flagged for manual review. It significantly reduced the manual workload during tax season. For Cameron's situation with agricultural vendors, this type of automated classification would be especially valuable given the volume. Even a basic spreadsheet with conditional formatting could help categorize vendors more efficiently than manual review of each one. The upfront investment in properly categorizing vendors pays dividends every tax season - not just in reduced administrative burden, but also in demonstrating professional compliance practices if you ever face an audit. Cameron's definitely on the right track questioning this blanket approach!

Welcome to the community, and thanks for summarizing this discussion so well! As another newcomer, I've been following this conversation closely and find myself in a very similar situation at my company. What's particularly helpful is seeing how experienced practitioners like Jessica, Isaac, and Jamal have laid out both the regulatory requirements and practical implementation strategies. The consensus is overwhelmingly clear that Cameron's instincts are correct. One thing I'd add from my own recent experience - when I had to make a similar case to senior management about changing our 1099 processes, what really resonated was showing them examples of confused vendor calls we'd received from corporations wondering why they got 1099s. It made the "hidden costs" of over-reporting much more tangible than just talking about administrative burden. Cameron, you have incredibly strong support here from people with real experience across multiple industries. The combination of regulatory backing (IRS Publication 1099), practical cost-benefit analysis, and the risk of appearing unprofessional to vendors makes this a pretty compelling case for changing course. Good luck with that conversation! @Cameron Black - Keep us posted on how it goes with your senior tax manager!

Welcome to the community, Caleb! Your point about vendor confidence is really important and something I hadn't fully considered. You're absolutely right that sending unnecessary 1099s can signal a lack of understanding of tax regulations, which might make vendors question other aspects of the business relationship. As another newcomer who's been following this discussion closely, I'm struck by how this seems to be such a common issue across different industries. It really highlights the importance of having clear, well-understood procedures rather than just defaulting to "when in doubt, send it out." Cameron, what's particularly compelling about your situation is that you're not just dealing with one company's vendors, but managing this across multiple agricultural operations. Getting this right could set a professional standard across all your clients and potentially save hundreds of hours annually. The ripple effects of implementing proper entity classification procedures could be significant. I'd be curious to hear how your conversation with the senior tax manager goes - this discussion has given you such strong backing from experienced practitioners that it seems like you have an excellent foundation for making your case. The combination of regulatory compliance, cost savings, and professional reputation protection makes this a pretty straightforward business decision. @Cameron Black - Thanks for bringing up this question - it s'been an incredibly educational discussion for all of us newcomers!